Determinants of Environmental Innovation

in US Manufacturing Industries

Smita Brunnermeier, Princeton University

Mark Cohen, Vanderbilt University

Journal of Environmental Economics and Management. 2003. Vol. 45. Pg 278-293.

Process of Technological Change

Invention

Commercialization

Diffusion
 Environmental Innovation
Acid rain prevention
Air pollution prevention
Water pollution prevention
Solid waste disposal
Hazardous or toxic waste destruction or
containment
Recycling or reusing waste
Alternative energy sources
 Pollution Abatement Expenditure and Innovation

16.5 500
Expenditure 475
Expenditures (Billions 1989$)

15.5
450

14.5 425

Patents
400
13.5
375

12.5 350

325
11.5
Patents 300

10.5 275
1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992
Year
 Model

Abatement Costs

Time effects Monitoring

Propensity to patent Environmental R&D Market Structure

Capital Intensity Industry Size

International Pressure
 Estimation Results
Variable Linear, Fixed Poisson, Population Negative Binomial, Negative Binomial,
Effects Averaged Fixed Effects Random Effects

Abatement 0.0125 0.0005 0.0005 0.0004

Costs (0.000)*** (0.004)*** (0.044)** (0.045)**

Monitoring -0.0025 -0.0002 0.0004 0.00009

(0.109) (0.760) (0.388) (0.822)

Industry Size 0.00005 0.0000007 0.0000005 0.0000005

(0.002)*** (0.000)*** (0.012)** (0.004)***

Market Power -0.6395 -0.8963 0.1067 -1.086

(0.477) (0.027)** (0.779) (0.004)***

Capital Intensity 4.6501 1.4138 1.581 1.1211

(0.270) (0.016)** (0.065)* (0.199)

International 0.0307 0.0180 0.0598 0.0237

Pressure (0.414) (0.214) (0.000)*** (0.086)*
 Conclusions and Future Research
Innovation responds to incentives, including
regulatory and market pressures.

Type of environmental policy.

Level versus quality of innovation.

Invention commercialization diffusion.

Effect on industry profitability.